Voluntary Deductible
Suppose, you have bought a brand new car and as mandated by the law, you have also got a motor insurance policy to protect it. You are an efficient and responsible driver, so you’re not worried about the car. However, as inflation surges across the world, you are really worried about paying the insurance premiums. Ensuring that you get enough coverage for an affordable premium is essential in this situation.
This is where a Voluntary Deductible - one of the easiest ways to reduce insurance premium - comes to your rescue.
Just like your third-party policy protects you and your car from financial and legal liabilities, Deductibles protect insurers against unnecessary claims. A Voluntary Deductible ensures that you are more careful with your car as you have to bear a certain amount of expenses. And if you are a good driver, you will profit from this option, as it will eventually save you a considerable amount on your premiums.
So how does this work? Let’s find out!
Compulsory Deductible Vs. Voluntary Deductible
Both the deductibles have their own significant features. Hence, their differences have been drawn out in the following table, for a better understanding.
Compulsory Deductible |
Voluntary Deductible |
It is the amount that is fixed by the insurer based on your vehicle engine capacity. |
This amount is chosen by you, if you wish to opt for it. |
The compulsory deductible does not affect the premium; it remains the same. |
Higher the voluntary deductible, lesser the premium you pay. |
No discount is available here. |
Discount on premium is available. |
It is a predetermined amount that has to be paid compulsorily by you in case of a claim. |
It is a predetermined amount that has to be paid voluntarily by you in case of a claim. |
Here is an example to put things into perspective.
Suppose, a collision accident has caused some major frame damage to Yashi’s car. She needs to raise an insurance claim of Rs 20,000 to repair it. Her car has an engine capacity of 1400 CC and the voluntary deductible amount set by her is Rs. 5000.
A point to be noted: If the engine capacity of your car is below 1500 CC (Cubic Capacities), you will need to pay Rs. 1000 as the Compulsory Deductible.
So in this case, Yashi’s Compulsory Deductible amounts to Rs. 1000.
Voluntary Deductible = Rs. 5000
Therefore, the insurer will offer -
Rs. 20,000 - (1000 + 5000)
= Rs. 20,000 - 6,000
= Rs. 14,000
Hence, the insurer will offer Yashi Rs. 14,000 to repair her car damages, and the rest of the amount, i.e. Rs. 6,000 (Rs. 1,000 of Compulsory Deductible + Rs. 5,000 of Voluntary Deductible) has to be paid by her.
Please note that this example does not consider depreciation and consumables amount, and has been simplified for an easier understanding.
Voluntary Deductible is a great way to reduce the premiums of your car insurance and proves to be really beneficial in the long run. So if you are an efficient, experienced driver and have a sufficiently large emergency fund available, you can opt for a higher voluntary deductible. On the other hand, if you live in an accident-prone area, not opting for the voluntary deductible would be more prudent as it will financially drain you every time whenever you make a claim. The amount of voluntary deductible you opt for will always depend on your comfort level and choice.